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Isarescu: BNR immediate goal is to ensure necessary liquidity to fund expenses of state,real economy
The immediate goal of the National Bank of Romania (BNR) remains to ensure the necessary liquidities to fund the expenditures of the state and real economy, in conditions of relative exchange rate stability and gradual and sustainable reduction of interest rates, BNR Governor Mugur Isarescu said.
"For the next period, the immediate goal of the National Bank of Romania remains to ensure the necessary liquidity to finance the expenditures of the state and the real economy in conditions of the relative stability of the exchange rate of leu currency and the gradual and sustainable reduction of interest rates. We will follow the development of the health situation and the measures taken by the authorities, in order to adopt the appropriate decisions. The inflation report for the first quarter of this year will be published at the end of this month," Mugur Isarescu said.
In a release sent on Monday, he explained that after overcoming the tensions generated by the COVID-19 crisis on the domestic financial market at the end of March 2020, the BNR's immediate goal was to maintain the stability gained and to ensure the liquidity needed to finance the public sector, companies and population in good conditions. To this end, the BNR considerably increased the volume of repo operations performed on a bilateral basis (whose average daily stock reached approximately 13 billion lei between April 1 and May 15, 2020) and then initiated the purchase of government securities on the secondary market (their stock totalling 3.1 billion lei in mid-May).
The Governor mentioned that the magnitude of these liquidity infusions is also highlighted by the fact that, in February, the BNR carried out liquidity absorption operations, the daily average being about 3 billion lei. After the downward adjustment recorded as a reaction to the reduction from 2.50 per cent to 2.00 per cent of the monetary policy interest rate, the three-month ROBOR quotation decreased from 3.24 per cent (March 20 this year) to 2.61 per cent ( March 23 this year), and then at 2.44 per cent (May 15 this year). At the same time, the leu/euro exchange rate dampened its fluctuations, oscillating in a narrow range (of 0.4 per cent), with favourable implications on the service of foreign currency debt and the cost of imports, as well as on the expectations regarding macroeconomic developments.
Against this background, between April 1 and May 15, the Ministry of Public Finance successfully launched on the domestic primary market of government securities a number of 14 issues, totalling about 11 billion lei, most of which were consistently oversubscribed, especially those in the first part of May. The reference quotations on the secondary government securities market have accentuated their downward movement from the beginning of April until now.